第7章

Thelikeholdstruefortheworkandpayoftheforceofworkmenengagedintheindustrialprocessesunderbusinessmanagement。Itholds，inameasure，ofallmodernindustrythatproducesforthemarket，butitholdstrue，inaneminentdegree，ofthoselinesofindustrythataremorefullyundertheguidanceofmodernbusinessmethods。Thesearemostcloselyintouchwiththemarketandaremostconsistentlyguidedbyconsiderationsofvendibility。Theyarealso，onthewhole，morecommonlycarriedonbyhiredlabor，andthewagespaidarecompetitivelyadjustedongroundsofthevendibilityoftheproduct。Thebruteserviceabilityoftheoutputoftheseindustriesmaybealargefactorinitsvendibility，perhapsthelargestfactor；butthefactremainsthattheendsoughtbythebusinessmenincontrolisaprofitablesale，andthewagesarepaidasameanstothatend，nottotheendthatthewayoflifemaybesmootherfor。theultimateconsumerofthegoodsproduced。(27*)

Theoutcomeofthisrecital，then，isthatwhereverandinsofarasbusinessendsandmethodsdominatemodernindustrytherelationbetweentheusefulnessofthework(forotherpurposesthanpecuniarygain)andtheremunerationofitisremoteanduncertaintosuchadegreethatnoattemptatformulatingsucharelationisworthwhile。Thisiseminentlyandobviouslytrueoftheworkandgainsofbusinessmen，inwhateverlinesofbusinesstheyareengaged。Thisfollowsasanecessaryconsequenceofthenatureofbusinessmanagement。

Workthatis，onthewhole，uselessordetrimentaltothecommunityatlargemaybeasgainfultothebusinessmanandtotheworkmenwhomheemploysasworkthatcontributessubstantiallytotheaggregatelivelihood。Thisseemstobepeculiarlytrueofthebolderflightsofbusinessenterprise。Insofarasitsresultsarenotdetrimentaltohumanlifeatlarge，suchunproductiveworkdirectedtosecuringanincomemayseemtobeanidlematterinwhichtherestofthecommunityhasnosubstantialinterests。Suchisnotthecase。Insofarasthegainsoftheseunproductiveoccupationsareofasubstantialcharacter，theycomeoutoftheaggregateproductoftheotheroccupationsinwhichthevariousclassesofthecommunityengage。

Theaggregateprofitsofthebusiness，whateveritscharacter，aredrawnfromtheaggregateoutputofgoodsandservices；andwhatevergoestothemaintenanceoftheprofitsofthosewhocontributenothingsubstantialtotheoutputis，ofcourse，deductedfromtheincomeoftheothers，whoseworktellssubstantially。

Thereare，therefore，limitstothegrowthoftheindustriallyparasiticlinesofbusinessjustspokenof。A

disproportionategrowthofparasiticindustries，suchasmostadvertisingandmuchoftheothereffortsthatgointocompetitiveselling，aswellaswarlikeexpenditureandotherindustriesdirectedtoturningoutgoodsforconspicuouslywastefulconsumption，wouldlowertheeffectivevitalityofthecommunitytosuchadegreeastojeopardizeitschancesofadvanceorevenitslife。Thelimitswhichthecircumstancesoflifeimposeinthisrespectareofaselectivecharacter，inthelastresort。Apersistentexcessofparasiticandwastefuleffortsoverproductiveindustrymustbringonadecline。Butowingtotheveryhighproductiveefficiencyofthemodernmechanicalindustry，themarginavailableforwastefuloccupationsandwastefulexpendituresisverygreat。Therequirementsoftheaggregatelivelihoodaresofarshortofthepossibleoutputofgoodsbymodernmethodsastoleaveaverywidemarginforwasteandparasiticincome。Sothatinstancesofsuchadecline，duetoindustrialexhaustion，drawnfromthehistoryofanyearlierphaseofeconomiclife，carrynowell-definedlessonastowhatamodernindustrialcommunitymayallowitselfinthisrespect。

Whileitisinthenatureofthingsunavoidablethatthemanagementofindustrybymodernbusinessmethodsshouldinvolvealargemisdirectionofeffortandaverylargewasteofgoodsandservices，itisalsotruethattheaimsandidealstowhichthismannerofeconomiclifegiveseffectactforciblytooffsetallthisincidentalfutility。Thesepecuniaryaimsandidealshaveaverygreateffect，forinstance，inmakingmenworkhardandunremittingly，sothatonthisgroundalonethebusinesssystemprobablycompensatesforanywastesinvolvedinitsworking。Thereseems，therefore，tobenotenablegroundforthinkingthattheworkingofthemodernbusinesssysteminvolvesacurtailmentofthecommunity’slivelihood。Itmakesupforitswastefulnessbytheaddedstrainwhichitthrowsuponthoseengagedintheproductivework。

1。TheulteriorgroundofeffortsdirectedtotheaccumulationofwealthisdiscussedatsomelengthintheTheoryoftheLeisureClass，ch。II。andV，andtheeconomicbearingofthebusinessman’sworkistreatedinapaperon“IndustrialandPecuniaryEmployments，“intheProceedingsofthethirteenthannualmeetingoftheAmericanEconomicAssociation。Cf。alsoMarshall，PrinciplesofEconomics(3ded。)，bk。I。ch。III，bk。IV。ch。

Itissignificantthatjoint-stockmethodsoforganizationandmanagement——thatistosay，impersonallycapitalisticmethods——aretraceable，fortheiroriginandearlyformulation，totheshippingcompaniesofearlymoderntimes。Cf。K。Lehmann，DiegeschichtlicheEntwickelungdesAktienrechtsbiszumCodedeCommerce。ThelikeviewisspokenforbyEhrenberg，ZeitglterderFugger；seevol。II。pp。325etseq。

Cf。Cantillon，EssaisurleCommerce，1epartie，ch。III，VI，IX，XIV，XV，WealthofNations，bk。I；Bucher，EnstehungderVolkswirtschaft(3ded。)，ch。IVandV；Sombart，Kapitalismus，Vol。Ibk。I。

Sombart，vol。I。ch。IV-VIII；Ashley，EconomicHistoryandTheory，bk。II，ch。VI，especiallypp。389-397。

Cf。Marshall，PrinciplesofEconomics，onthe“LawofSubstitution，“e。g。bk。VI。ch。I。Thelawofsubstitutionimpliesfreedomofinvestmentandappliesfullyonlyinsofarastheinvestorinquestionisnotpermanentlyidentifiedwithagivenindustrialplantorevenwithagivenlineofindustry。Itrequiresgreatfacilityinshiftingfromonetoanotherpointofinvestment。Itisthereforeonlyasthebusinesssituationhasapproachedthemodernformthatthelawofsubstitutionhascometobeofconsiderableimportancetoeconomictheory；foratheoryofbusiness，suchasbusinesswasinmediaevalandearlymoderntimes，thislawneedscarcelyhavebeenformulated。

SeeSombart，Kapitalismus，vol。1。chap。VIII。

Itischieflythepassiveownerofstockandthelikethatholdspermanentlytoagivenenterprise，underthefullydevelopedmodembusinessconditions。Theactivebusinessmanofthelargersortisnotinthiswayboundtotheglebeofthegivenbusinessconcern。

Cf。testimonyofJ。B。Dill，ReportoftheIndustrialCommission，vol。I。pp。1078，1080-1085；“DigestofEvidence，“

p。，77。alsotestimonyofvariouswitnessesonstockspeculationandcorporatemanagement，andparticularlythespecialreporttotheCommission，on“SecuritiesofIndustrialCombinationsandRailroads，“vol。XIII。，especiallypp。920-922。

Thehistoryoftheformationofanyoneofthegreatindustrialcoalitionsofmodemtimeswillshowhowgreatandindispensableafactorinthelargebusinessistheinventionandorganizationofdifficultiesdesiredtoforcerivalenterprisestocometoterms。E。g。themanoeuvrespreliminarytotheformationoftheUnitedStatesSteelCorporation，particularlythemovementsoftheCarnegieCompany，showhowthisworksonalargescale。Cf。E。S。Meade，TrustFinance，pp。204-217。ReportoftheIndustrialCommission，vol。XIII。，“ReviewofEvidence，“

pp。v-vii，withthetestimonyrelatingtothistopic。Thepressurewhichbringsaboutanewadjustment(coalition)iscommonlyspokenofas“excessivecompetition。“

Cf。，e。g。，theaccountsoftheformationoftheUnitedStatesSteelCorporationortheShipbuildingCompany。

Witnesstheratewarsandtheduplicationsofinefficienttrackandterminalequipmentamongtherailways，andthesimilarduplicationsintheironandsteelindustry。ThesystemofrailwayterminalsinChicago，e。g。，isanilluminatedobject-lessonofsystematicineptitude。

Thesplendidreachofthisinhibitoryworkofthecaptainofindustry，aswellasofhisaggressiveworkofconsolidation，iswellshown，forinstance，inthehistoryandpresentpositionoftherailwayindustryinAmerica。Itisandhasforalongtermofyearsbeenobviousthataverycomprehensiveunificationorconsolidation，inrespectofthemechanicalworktobedonebytherailwaysystem，iseminentlydesirableandfeasible，-

consolidationofascopenotonlyequalling，butfaroutreaching，thecoalitionswhichhavelatelybeeneffectedorattempted。Thereisnohazardinventuringtheassertionthatseveralhundredsofmenwhoareengagedinthemechanicalworkofrailroading，inonecapacityandanother，areconversantwithfeasibleplansforeconomizingworkandimprovingtheservicebymorecomprehensiveandclosercorrelationofthework；anditisequallyobviousthatnothingbutthediverginginterestsofthebusinessmenconcernedhindersthesecloserandlargerfeasiblecorrelationsfrombeingputintoeffect。Itiseasilywithinthemarktosaythatthedelaywhichrailwayconsolidationhassuffereduptothepresent，frombusinessexigenciesasdistinctfromthemechanicalcircumstancesofthecase，amountstoanaverageofatleasttwentyyears。Eversincerailroadingbeganinthiscountrytherehasbeengoingonaprocessofreluctantconsolidation，inwhichthemovementsofthebusinessmenincontrolhavetardilyfolloweduptheopportunitiesforeconomyandefficientservicewhichtherailroadindustryhasoffered。

Andtheirlatestandboldestachievementsalongthisline，asseenfromthestandpointofmechanicaladvisability，havebeenforegoneconclusionssinceadatesofarinthepastastobeforgotten，andtakenattheirbesttheyfallshortto-daybynotlessthansomefiftypercent。oftheiropportunities。Cf。ReportoftheIndustrialCommission，vol。XIX。，“Transportation，“

especiallypp。304-348。

Likeothercompetitivebusiness，butmoreparticularlysuchbusinessashastodowiththeinterstitialadjustmentsoftheindustrialsystem，thebusinessofrailwayconsolidationisofthenatureofagame，inwhichtheendsoughtbytheplayersistheirownpecuniarygainandtowhichtheindustrialserviceabilityoftheoutcomeisincidentalonly。Thisisrecognizedbypopularopinionandismademuchofbypopularagitators，whotaketheviewthatwhenoncethegamebetweenthecompetingbusinessinterestshasbeenplayedtoafinish，inthedefinitivecoalitionofthecompetitorsunderonemanagement，thenthegamewillgoonasasomewhatone-sidedconflictbetweentheresultingmonopolyandthecommunityatlarge。

Soagain，asafurtherillustration，itisandfromtheoutsethasbeenevidentthattheiron-orebedsofnorthernWisconsin，Michigan，andMinnesotaought，industriallyspeaking，tohavebeenworkedasonecollectiveenterprise。Therearealsononebutbusinessreasonswhypracticallyalltheorebedsandironandsteelworksinthecountryarenotworkedasonecollectiveenterprise。Itisequallyevidentthatsuchcorrelationsofworkasarepermittedbythebusinesscoalitionsalreadyeffectedinthisfieldhaveresultedinagreateconomyofproduction，andthatthefailuretocarrythesecoalitionsfarthermeansanannualwasterunningupintothemillions。Boththeeconomiessoeffectedandthewastesoincurredaretobesetdowntotheaccountofthebusinessmannerswhohavegonesofarandhavefailedtogofarther。Thelikeisobviousasregardsmanyotherbranchesofindustryandgroupsofindustries。